UPDATE 1-Kia to expand engine production in Slovakia

(Adds more details, background)

TEPLICKA NAD VAHOM, Slovakia, Dec 7 (Reuters) - South Korea's Kia Motors <000270.KS> will build a new production unit to raise engine output capacity at its Slovak car factory, Kia Motors Slovakia President In-Kyu Bae said on Thursday.

Bae told reporters the new facility would raise potential engine production at the Zilina plant to 500,000 to 600,000 units a year, from currently planned 300,000.

"In the first or second quarter of the next year, we will start building the new engine factory in Zilina. It should start operating at the end of 2008," Bae said, adding he could not elaborate on the expected cost of the new factory.

The extra output should boost Slovakia's exports as the new plant will supply a Hyundai <005380.KS> car assembly plant to be built in the neighbouring Czech Republic.

Bae said the assembly plant in Zilina, which Kia inaugurated on Thursday, should make more than 5,000 cars this year. Output, consisting of the Cee'd and Sportage models, will rise to over 150,000 cars in 2007.

The total capacity of the Slovak plant will be 300,000 cars a year, which it should reach in 2008 or 2009.

Kia's operations will add strength to Slovakia's car industry, which is the key sector of the new European Union's member's economy.

The automotive industry in Slovakia currently consists of assembly plants of German Volkswagen <VOWG.DE> and French PSA Peugeot Citroen <PEUP.PA>, and a number of car parts producers.

The three factories together should make Slovakia the world's biggest car maker per capita, with expected annual output of over 800,000 units in 2008 or 2009. ((Reporting by Martin Dokoupil, writing by Jan Lopatka and Peter Laca, editing by Quentin Bryar; Reuters Messaging: peter.laca.reuters.com@reuters.net; +421 2 5341 8402))

Keywords: KIA SLOVAKIA/